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Stock Fundamental Analysis - What Do I Need To Know About Fundamental Analysis Of Stocks?

Aug 17, 2007
If you take a closer look at fundamental analysis you will find that it has a lot to do with supply and demand. This is because analysis is used as a term to describe the different factors in supply and demand and how they are affected by one another. But beyond that, the analysis is something that is used to determine where a business is going and how well it is doing.

This does have a lot to do with supply and demand, but can also have a lot to do with other fundamental information. This fundamental information that is part of analysis includes financial reports, non-financial information, estimates of growth of demand, industry comparisons, the effects of new regulations and economy wide changes. A lot of times this information in fundamental analysis is compared with technical analysis to get the most out of both.

Those looking to invest in a company will be the most likely to use fundamental analysis. This is because the research is used to not just look at the value of the company, but to look at the company itself. This includes the results of its finances and it's potential to grow. The fundamentals can give a better picture the entire company, not just a snapshot. This means that analysis is used to look at the long term of a company not just the short term.

The most common way that fundamental analysis is done in is in three steps:

1) The first step to this type of analysis includes looking at the macroeconomic situation. This includes GDP, growth rates, inflation, interest rates, exchange rates, productivity and energy prices.

2) The next step taken in analysis in this category is looking at the industry as a whole. This includes total sales, price levels, competition and their effects, foreign competition as well as any entrances or exits from the industry.

3) Last in this process of studying the fundamentals includes looking at the company individually. This includes looking at unit sales, prices, new products, earnings and any chance of debt or equity occurring.

You can either use this procedure as a top down one or a bottom up one. It just depends if you start with the individual company, the bottom up option, or the reverse, known as the top down analysis.

As you can see there are many aspects involved with carrying out good analysis of the the fundamentals of a company. But the basics are pretty easy to understand. Fundamental analysis is an invaluable tool for those who run businesses or are looking to invest in one. This is because it is able to look at the bigger picture and give a fuller view than other older methods. This is bound to be the best idea if you are looking for the most information.
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